Published on 13/01/2020 12:03:03 PM | Source: Axis Securities Ltd

Buy Security and Intelligence Services Ltd For Target Rs.1,190 - Axis Securities

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Investment Rationale

Security and Intelligence Services (India) Ltd (SIS), is a leading security services company in India and Australia with leadership positions in cash logistics and facility management services. The SIS group has expanded its footprint not just across 29 Indian states, but also across a widespread network in Australia and Singapore with an unremitting spirit of innovation and a dynamic and multifaceted portfolio of services that offers clients enduring value. SIS operates mainly into four segment areas viz. Security Services – India, Security Services – International, Facility management and Cash Logistics services. It also provides Electronic Security Solutions, Alarm Monitoring and Response and Pest Control services as a part of its various business verticals.


Robust Business Structure

* SIS has successfully diversified its business to facility management and cash logistics to reduce dependency on security services. Diversifications will help SIS to retain the clients for longer term and also will help to strengthen the relationship among them.

* SIS is also in a pole position in security services in domestic market which is one of the fastest growing segment in India with ~20%CAGR rate. Its international business MSS security services also has largest market share in Australia private security services market.

* SIS has established a wide network, a wide range of services, an understanding of each service line, strong brand, and capabilities to successfully render services across a broad spectrum of customer segments. All of these are assets for the company in its quest for growth. They have helped SIS enhance its credibility with customers, thereby strengthening its market position.


Security services in India is growing with robust momentum

* The security services market in India is witnessing high growth mainly aided by improved economic environment, increasing concerns about crime and terrorism, inadequate public safety measures, and growing industrial zones.

* Indian security market has grown more than 20% CAGR over last decade. Many new players were added and their operational capabilities enhanced.

* The security services in India is likely to grow at a rate higher than the current growth rate of 20% on account of growing concerns for security, exponential rise in number of banks and expanding ATM network, technological advancement and higher penetration of foreign players through FDI.

* As per the statistics published by Bureau of Police (Research and Development India) actual police personnel to population ratio was 1:712 as against the sanctioned strength of 1 police officer for 547 people. A large workforce in the private security space can be utilized to make up for the low police to citizen ratio, with careful policy interventions to identify non-core areas of police and security functions that could be outsourced to such agencies—for example, senior citizen monitoring, outer periphery guarding of prisons and other government establishments, event security and police verification etc.


Expanding India Security Services

* SIS is one of the leading security services provider in India, with 177 branches and 1,54,700 employees across India. The company is covering more than 14,800 sites in 29 states of India. SIS has highest penetration in terms of Indian demographics.

* SIS India business is growing rapidly and consistently with CAGR of 25% over the last two years. The India security business contributed around 40% to the top line. In FY19 the segment contributed around Rs.2,696 crs and Rs. 879 crs. in Q2 FY20 and is likely to continue the growth momentum of 23% CAGR over next two years, aided by growing demand for security guards across industries, commercial centers and offices.

* The company also has definitive inorganic strategy to attain higher growth and to increase the market share. The recent acquisitions SLV and Uniq businesses have reported healthy contribution to revenue and EBITDA (6.4% EBITDA margin in Q2 FY20).

* The India security services segment employed more than 1,54,700 security guards as at the end of Q2FY20 (grew more than 19% CAGR in last two years).We believe increasing top line contribution from Indian security business will help to generate more operating efficiency.


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